ISMM Unit U201 Understanding Laws and Ethics of Selling

1. Understand the Laws affecting selling in an organisation

Overview

As a professional salesperson it is vitally important that you properly understand the law. It is also
very important that you know about regulatory and voluntary codes of practice. Working to codes of
practice is essential to maintain professional integrity, and it is this integrity that allows you to
achieve sales against less scrupulous competitors. I you are travelling overseas as a salesperson you
should make a point of familiarising yourself with the common law of the countries and territories
you are visiting; in many cases your failure to do so could lead to imprisonment or deportation,
which of course would be disastrous.

Following several mis-selling scandals in the UK and USA there is now much more sensitivity to sales
practices that could possibly be interpreted as unethical. As a wise salesperson you will ensure that
you and your organisation benefits by adopting a principled, ethical approach to all that you do.

Laws are rules set by society and enforced by a political authority.

1.1 Identify the laws affecting selling in an organisation

As a professional salesperson you will want to be fully aware of all the legal factors relevant to your
role. Much of this information will be available from your organisation itself. However, as an ethical
professional it is in yours, your employers and your customers’ interests to develop and maintain as
much expertise as you can in your own right. This is exactly the same professional principle as being
an expert in your offering and understanding how each of your customers will benefit from owning
or using your products and services.

The internet is a very accessible source of all kinds of information, and you will find plenty of sites
that carry details that will help you. Be careful to validate information obtained this way and use
official sites to help you understand the actual law, rather than some of the more opinionated
sources that are available.

In the UK, the government website www.gov.uk is a good starting place for information on
regulatory and voluntary codes of practice. There will be information that is specific to your industry
and product or service offerings.

Some areas you may wish to explore in depth are:

 Buyers' terms and conditions and unfair contract terms

Remember that business purchasers of goods and services don't have the same automatic
protection as consumers.

 Consumer credit
The rules on consumer credit are complex and there is a wealth of information at www.oft.gov.uk
which the Office of Fair Trading part of the government website. You will find an overview of the
rules about consumer credit and whether your business needs a consumer credit licence.

 Customer protection

Follow the Consumer protection part of the site for an introduction to the rights of customers when
buying goods or services from you.

 Fair trading, trade descriptions and Trading Standards

Here you can access details of the fair-trading laws, trade descriptions and the role of Trading
Standards.

 Privacy and data protection in direct marketing

Understand the steps you must take to protect your customers' personal information, including the
rules on unsolicited emails and telephone calls.

 Product labelling and packaging

You will find an introduction to the law on marking prices and labelling products and related
information here.

 Returns and refunds, warranties and complaints

An introduction to the rights customers have when buying goods or services from you is available
here.

 Sunday trading

Understand the laws that apply to businesses that trade on Sunday.

 The Sale of Goods Act

Keep on the right side of the law when selling to your customers as consumers and private
individuals.

 Weights and measures

Understand the rules applying to the sale of goods by weight or other measures such as volume or
length.

 Data protection act

Learn about using personal information fairly and lawfully in line with the Data Protection Act 1998.
1.2 Describe how the laws affect selling in an organisation

How does the law affect selling in an organisation? First, it is the duty of the organisation to ensure
their goods and services are fit for purpose; this means that the goods do what they can be
reasonably expected to do.

Let’s say you’re selling fountain pens, if you advise your customer that the pen is guaranteed not to
leak and has a warranty for five years, and then the customer can reasonably expect to have a pen
that does not and will not leak for the next five years. If it does, and they report the matter to your
company, and if the company does nothing about it, then the customer could take their case to the
Director-General of Fair Trade and ultimately could have your company fined.

Here is some useful information about Government Acts, regulations and organisations.

Consumer Protection Act 1987

This Act was introduced to protect consumers from fraud and from unsafe products. It assures
consumers that producers or sellers can be held liable for any damage done by defective products.

The act has three parts as follows:

Part 1 implemented European Community (EC) Directives known as the product liability directives,
by introducing a regime of strict liability for damage arising from defective products. It is important
to note that liability under this act is strict, and there is no need to demonstrate fault or negligence
on behalf of the producer. Nor can liability be "written out" by an exclusion clause.

Part 2 gave the government powers to regulate the safety of consumer products through Statutory
Instruments. Note here that Section 2 defines a defect as being present when "the safety of the
product is not such as persons generally are entitled to expect". Safety is further defined as to apply
to products that are component parts or raw materials in other products, and to risks to property as
well as risks of death and personal injury.

Part 3 defined a criminal offence of giving a misleading price indication. It then became a crime in
consumer law to give a misleading price indication in the course of business.

The General Product Safety Regulations (GPS) 2005

The regulations state that the selling organisation must only sell products that are safe in normal or
reasonable foreseeable use. This is why we rarely find second hand shops and charity shops selling
second hand electrical goods any more.

Fines of up to £20,000 and up to 12 months in prison could be imposed for companies selling unsafe
products.

Office of Fair Trading (OFT)

In 1973 the Fair Trading Act established the OFT. This is the UKs official watchdog and is responsible
for overseeing consumer protection. When a trader has been found to be unfair to customers, or is
acting in a manner that is against the customers’ interests regarding health, safety and other
matters, the OFT can demand that the trader gives a written assurance that he or she will stop acting
in this manner.

Consumer Protection from Unfair Trading Regulations 2008

The Consumer Protection from Unfair Trading Regulations 2008 introduces a general duty not to
trade unfairly and seeks to ensure that traders act honestly and fairly towards their customers.

There are three main sections in the Consumer Protection from Unfair Trading Regulations (CPR).
These are as follows:

 The general ban on unfair commercial practices

 Misleading and aggressive practices which are assessed in light of the effect they have, or are
likely to have, on the average consumer
 The Black List which contains the list of those practices which are unfair and thus banned

Misleading actions

Companies are not allowed to use misleading or underhand tactics to get customers to part with
their money. Misleading actions include advertising goods that don't exist, or offering just a few
items at the advertised price with no hope of meeting large demand.

If your organisation has signed up to a code of practice, then if it fails to follow this code, it could be
a breach of the CPRs. For example, if you represent a garage that has signed up to the Motor
Industry Code of Practice for Service and Repair, and the garage fails to follow it; this could then
constitute a breach of the CPRs.

As a trader you are also banned from lying about goods or passing them off as another product to
give them credibility. For example if you say 'we only fit genuine, branded parts', when in reality you
fitting non-branded parts to your customers’ cars.

Misleading omissions

Sometimes it's not what's actually said that's the problem. Sometimes it’s what's been left out that's
the issue.

The CPRs aim to ensure traders who are economical with the truth, or miss out key information that
customers might need to make an informed decision, will be caught out too. As a trader (and
therefore as a salesperson) you must make sure you provide information in a timely manner - and
not so late that it's of no use to the buyer.

You can be considered misleading if you as a trader do any of the following:

 Omit material information that the average consumer buyer needs, according to the
context, to take an informed transactional decision
 Hide or provide material information in an unclear, unintelligible, ambiguous or untimely
manner
 Fail to identify the commercial intent of the commercial practice if not already apparent
from the context, e.g. by hiding the fact that you are aiming to sell products and services.
You must also ensure that information as always displayed clearly – the law treats an obscure
presentation as tantamount to an omission.

Aggressive practices

Your sales tactics can greatly influence a consumer's buying decision. Traders who fail to take no for
an answer, refuse to leave until a contract is signed or use threatening behaviour will be committing
an offence. By definition, a practice is considered aggressive if the average consumer’s freedom of
choice or conduct is significantly impaired.

The legislation contains a list of criteria to help determine whether a commercial practice uses
harassment, coercion, including physical force, or undue influence. Undue influence is categorised
by something that applies pressure 'even without using or threatening to use physical force, in a way
which significantly limits the consumer’s ability to make an informed decision.'

Here are some ways the CPRs may affect you in practice:

If you as a seller are accused of misleading consumers or acting aggressively, it's not enough to
simply demonstrate the activity, it also has to be shown that the practice influenced the consumer's
decision. However, this doesn't necessarily mean that the consumer has to have entered into a
contract, just that their actions were influenced in some way. It could be enough that the consumer
phoned you or decided to go into your shop or showroom.

Banned practices

In addition to tackling misleading and aggressive behaviour, the CPRs outlaw 31 specific practices
such as claiming something is free when it's not and they also outlaw persistent cold-calling.

Please be aware that with these 31 practices it is enough simply to demonstrate wrongdoing, and
there is no need for a complainant to show that it influenced the customer’s decision in any way.

The banned practices under the CPR’s are to there to ensure that traders, salespeople, marketing
professionals and customers are clear about what is prohibited.

The list of banned practices includes the following:

 Bait advertising: such as luring the consumer with attractive advertising around special
prices when you as the seller know that you cannot offer that product, or you only have a
few in stock at that price.
 Bait and switch: for example promoting one product with the intention of selling your
customer something different
 Limited offers: if you falsely state that a product will only be available for a very limited time,
or that it will only be available on particular terms for a very limited time, in order to elicit an
immediate decision and deprive your customers of sufficient opportunity or time to make an
informed choice.
 False free offers: such as describing a product as free or without charge if the consumer has
to pay anything other than the unavoidable cost of responding to the offer and collecting or
paying for delivery of the item.
  Pressure selling: if you try to create the impression that the customer cannot leave your
premises until a contract is formed.
 Aggressive doorstep selling: for example conducting personal visits to the consumer's home
ignoring the consumer's request to leave or not to return.

The above represent some of the more commonly met items on the banned list. It would be wise for
you to check all of them particularly with relevance to the type of business and industry that you are
working in.

Cross border trading

The CPRs also aim to clarify consumers’ rights and simplify the process of cross-border trade.

These regulations are therefore intended to give customers the same protection against unfair
practices and rogue traders whether they are buying from their corner shop or purchasing from a
website based in Spain.

This also means that your business can advertise and market to all 480 million consumers in the EU,
in the same way as to your domestic customers. The principle aim is to boost consumer confidence
and give business a uniform and transparent EU wide set of rules.

By demonstrating your ethical practices and following these regulations carefully you will maximise
your sales through increased customer confidence and further recommendations.

Product Liability

Here is an example of a situation which needed to be settled using legal help.

Fenton’s Solicitors dealt with a case involving a young child who was injured as a result of a faulty
design mechanism in the handle of a tricycle.

The pin that held the handle together was too short to keep the handlebars in place. As the child
was using the tricycle the handlebars completely came away. Without any way to control the tricycle
it hurtled down the garden path and crashed into concrete steps causing a nasty injury to his head.

The tricycle was made in China and imported by Argos. The parents bought it for their child from the
Huddersfield store.

After investigations into liability Argos have accepted that the problem was their fault and has
conceded liability.

(www.fentons.co.uk/article_runaway_argos_tricycle_796.asp retrieved November 2010)

1.3 Describe the consequences for self, organisation and customer if legal requirements are not
complied with

In life there are consequences to our actions, not only to us but also to others. If we do not obey the
laws of the land, then we risk imprisonment or heavy fines. If an organisation does not comply with
consumer laws then they risk a hefty fine.

In today’s society, organisations have to take great care that products and services do ‘what it says
on the tin’, or they could face court cases from dissatisfied customers.

The salesperson is often at the front line when it comes to complaints from dissatisfied customers,
and must be prepared to listen carefully to complaints as doing so often leads to a practical
resolution that rebuilds relationships and reinforces ultimate customer loyalty.

Self

What happens if you don't obey the law? You could be fined or arrested, go to prison, or have a
police record. If you go to prison for a few years aside from being denied your freedom, you would
be away from family and friends, you would live with other criminals and you would be socially
stigmatised.

Regardless of how much time you spend in prison, just being arrested will give you a police record,
then you might not be able to get the job you want, take out loans for things you want to buy and
you might not be allowed to travel into other countries on holiday.

Organisation

What happens if your organisation doesn’t obey the law?

The sales process – from the initial approach to long after the sale is completed – is controlled by a
number of important legal requirements designed to protect customers as described earlier.

Obeying the law can help your organisation build and maintain an honest and trustworthy
reputation.

If an organisation is found to be operating outside the law, they risk losing their reputation, being
fined and losing business.

Customer

What happens if your customer doesn’t obey the law?

If customers don’t obey the law there are implications for you as a supplier. Let’s say that your
customer offers you a gift. This could be viewed as bribery and you could be deemed guilty by
association with the customer. Such situations are best avoided by the professional salesperson and
many organisations have this written into their employment policies.

Here are some scenarios – have a think about what you would do in each instance
Scenario 1

"You are selling laptop computers in a local computer shop. A customer comes up to you and asks if
he can buy a certain model that is out of stock. He needs it urgently by the end of the week. You
know that new stock won't be arriving for a fortnight. Your manager has been putting the pressure
on you. He says that you need to make more sales. You think that if you tell the customer the truth,
he'll go somewhere else and won't buy from you. Should you make the sale, telling the customer
that he will get the laptop in time? What would you do?"

Scenario 2

“You are a telesales person; your company sells good, quality insurance to home owners with sky
television. You are not the official sky insurance company, but you have been given a list of data
regarding all the owners of sky and when their official sky insurance runs out. Your job is to phone
these people in their homes to see if they will renew and change their policy to your company
instead. You are on the phone to an elderly lady who obviously has mistaken you for the official sky
company and is giving you all her bank details so that she can take out a policy with you. You want
this sale. You are having pressure from your manager to make your targets. What do you do?"

Understand the ethics of selling

Overview

This session is designed to support your understanding of ethical requirements in sales and the
consequences of not following ethical practices for individuals, organisations and customers.

Ethics are about thinking and behaving the right way, and to apply high ethical standards you must
be prepared to accept personal responsibility for them. As a salesperson you are in a unique position
with your customers and clients. People and organisations place their trust in you. They will often
make far reaching personal, financial and corporate decisions when buying and much of their
opinion will be impacted one way or the other by how you operate.

It is a well known fact that certain types of selling can be unethical: the ‘hard sell’ tactics employed
by some sellers are designed to manipulate people into making decisions without letting them
consider all their options properly. In this author’s opinion based on over 40 years in sales, if a
product or service has to be sold that way it is most likely not as good as it is presented to be.

High pressure selling often leads to dissatisfaction with the products or services bought, with the
sellers themselves; and can lead to many on-going problems – a lot of them financial ones.
Unfortunately, the act of selling has for many people become associated with manipulative tactics
which can make it difficult for everyone in sales as there can be a lot of resistance to being ‘sold to’.

As a sales professional the best way to approach your task is to recognise that you are there to help
people to buy from you. And they will only do that when they recognise both the benefits and
potential drawbacks of your offering, and make their own choice supported by the information you
provide, the ideas you promote and the manner in which you conduct the whole exercise.

So, ethical companies and professional sales people recognise that operating wisely and with their
customers’ interests at heart, they can gain the trust of their customers from the outset and
maintain it throughout the whole buying process. You must therefore do all you can to demonstrate
your professionalism to build and maintain the respect and trust of everyone you deal with.

Ethics themselves partly depend on our culture: i.e. our values, attitudes, norms and expectations.

Ethics are impacted by:

 Where we come from

 Who we are
 How we respond
 Where we choose to ‘fit’ in the community at large
 How our ethical attitude affects selling.

Value judgements: a scenario

Two large organisations employ more than 75% of the adult population of a medium sized town.
Both offer components to manufacturers and both have a large sales force. Which do you think is
the better employer, organisation A or organisation B?

Organisation A: Organisation B:
Provides health care for the sales force No health facilities for the sales force

Have a subsidised staff canteen No staff canteen

Support many community initiatives Do not contribute to community initiatives

Helped to organise a thriving sports and No social club

social club
Pay 6% commission on all sales Pay 7% commission on all sales
Rated ‘satisfactory’ by city analysts Recommended for investment by city analysts

Better than average safety statistics Excellent safety record

There is no right answer because it depends on a person’s viewpoint.

If you were a shareholder, or a Health and Safety inspector, Organisation B might be chosen as the
‘better’ organisation because of its better financial position.

From a salesperson’s point of view Organisation B might not be the best because they might think
there is a lack of concern about its employees and the community.

An employee in Organisation A might think they are working in the best company because it has
good facilities and activities available outside of work. But another might think they should be giving
more thought to preventing accidents and assuring the future by making better returns to
shareholders.
Your decision about which is the ‘better’ organisation to work in will depend on your personal
values, attitudes, norms and expectations – your value judgements or ethics. So for example one
individual might refuse to work for an arms manufacturer or a tobacco company, however good
their reputation with the sales force.

Download the questionnaire attached to this session and complete it thoroughly. It’s designed to
encourage discussion of ethical issues and definitions of ethical and unethical practices.

For each of the activities write down in your opinion whether they are ethical or unethical in sales?

Depends

know
Don’t
Yes

No
Covering up for colleagues
Acting in favour of a customer out of friendship

Acting in favour of a customer for a bribe

Promoting staff on the basis of family ties or friendship

Accepting corporate hospitality

Discriminating against staff on the basis of colour, age,

religion, gender etc.
Presenting misleading information

Manipulating performance indicators to reach targets

Give out personal or organisational information to others

without their consent
Criticising your organisation to others

Supporting false or misleading advertising by your

organisation
Claiming expenses for things you bought for yourself and
not for work
Blaming other people in your organisation for your mistakes

Using office equipment for personal use

Telling ‘white lies’ such as ‘the cheque is in the post’

Would you encourage others to do any of the above?

TOTALS
2.1 Describe the qualities of an ethical salesperson

We have looked at the background to ethics and briefly discussed value judgements. But what is
required of us as salespeople? What qualities does an ethical salesperson possess?

Positive qualities for ethical selling are:

 Truth
 Honesty
 Professionalism

Negative practices are:

 Using hard sales techniques

 Discrediting competitors
 Unprofessional behaviour

It looks easy to tell the truth, be honest and professional, and, with sound knowledge of your
organisation, good product knowledge and personal integrity, it is easy. However, sometimes we
find ourselves in a dilemma i.e. having to make a choice about something we’re not certain about,
for example, ‘Should I tell the customer that we might not be able to deliver before Christmas?’

Successful salespeople either have or develop certain qualities that resonate with potential
customers or clients. These attributes fortunately coincide with those personal, ethical and moral
traits people in all walks of life learn to utilise, consciously or unconsciously, to improve their
relationships with others. Four of the more important of these attributes are honesty, discipline,
enthusiasm and perseverance. If you feel any of these are lacking or need development in you as a
salesperson, then you should aim to enhance them through personal effort or effective guidance by
your sales manager or human resources team.

Let’s take a look at each of these qualities and how they can have an impact on your success or
otherwise in sales.

Honesty:

Honesty in a salesperson includes not only the moral and ethical behaviour that deals with lying,
cheating and stealing, but also with the way in which he or she conducts a sales presentation.

An effective sales presentation fully explains the benefits of a product or service in straightforward,
factual terms that waste neither the customer's nor the salesperson's time. The presentation does
not include, however, misleading or false statements meant to boost the value of the offering.

Misleading or false information may seep into a sales presentation if the salesperson has not taken
the time required to become completely familiar with the product or service under discussion.
Familiarisation makes it less likely that the salesperson will, for instance, promise an impossible
delivery date or work commencement time or quote prices quite out of range with the company's
need to realise a profit.
Being honest requires a knowledgeable and sincere approach by the salesperson. You need to
properly understand and appreciate how your products and services are use or employed by your
customers and be prepared to discuss benefits and drawbacks from the customer’s perspective. This
is actually a really good way to demonstrate that you do have the customer’s interests at heart – and
is actually a very powerful sales tool.

The real task is to demonstrate to the buyer’s satisfaction that the benefits they will enjoy outweigh
any perceived drawbacks. A simple example is when the customer accepts that the proven reliability
of an item delivers better annual financial returns against the higher initial cost.

Approaching a presentation in this way demands that you do proper and detailed research first, but
delivers the kind of long term business relationships that lead to consistent sales over many years.

Discipline:

Discipline or self-control in a salesperson might focus on a tendency to lose one's temper and flare
up when faced with a potential customer who voices a multitude of objections during a sales
presentation. Such loss of self-control if it becomes habitual will, of course, doom the salesperson's
chances of great success with old or new customers. Anger management techniques might help
considerably.

Discipline also might refer to other more commonplace characteristics of the careless. Two will serve
to illustrate this point:

Coherence: Your sales presentation should explain the benefits of the product or service in a clear
and concise manner without you rambling on with meaningless chatter unrelated to the subject
matter. By maintaining a disciplined approach over how you deliver your presentation, you can
better keep the prospective customer interested in your offering. This can be achieved by following
a logical agenda that you have agreed with the customer at the outset.

Appearance: The salesperson who meets with customers or clients inappropriately dressed may put
a finish to a sales presentation before it begins. You do not have to dress in the latest fashion or
wear overly expensive suits to realise success as a salesperson, but a simple dress code that stresses
cleanliness and neatness will go a long way toward gaining acceptance with your customers.

Enthusiasm:

The successful salesperson will show passion for the product or services on offer, the company
behind the offering and the actual selling process. Such belief may not occur until after you have
worked for your company for a little while, but as your genuine enthusiasm develops so will your
accomplishments. Talk to existing customers as much as possible to learn what they appreciate
about your products and services. They will also tell you about any drawbacks which you can then
understand and learn how they are balanced by benefits to the customer.

This will ensure you can present a balanced and realistic approach when you are in a sales situation.
It will also equip you with the means to correct misunderstanding and possible misrepresentations
by potential customers.
Addressing an ethical dilemma.

If you do find yourself in an ethical dilemma, a simple way of defining the answer is to ask yourself
the following questions:

1. Is it legal? Will I be violating either civil law or company policy?

2. Is it balanced? Is it fair to all concerned in the short term as well as the long term? Does it
promote win/win relationships?
3. How will it make me feel about myself? Will it make me proud? Would I feel good if my
decision were published in a newspaper? Would I feel good if my family knew about it?

Salespeople face many ethical issues including bribery, deception, the hard sell and reciprocal
buying.

To overcome some of these problems, ethical organisations, those with a sense of Corporate Social
Responsibility (CSR), are now governed by codes of practice.

For example, the Association of Energy Suppliers (AES) code, or the Disability Equality Duty codes of
practice from the Disability Rights Commission (DRC), which is currently consulting on major new
changes in relation to disability equality for the public sector.

Different people in different cultures experience different ethical expectations and salespeople
globally must know the culture and ethical stance of their customers in order to relate effectively.

On a global scale, there are many who support a single international code for ethical selling,
particularly in the western world. Some of the points they incorporate are detailed below, which will
help you to work ethically in any modern culture. Your sales career will benefit enormously from
taking these ideas on board and living up to them in your day to day sales efforts.

 Ethical sales professionals understand that they are accountable. This applies not just to the
organisation they represent, but to their customers, clients and to society as a whole. This
means you have a responsibility to consider the wider implications of your actions –
including acting positively in the practice of your profession to promote a better
understanding of what professional sales practice represents. Naturally this also means you
must always uphold the highest professional standards in both your personal relationships
and in your work.
 Ethical sales professionals readily support the belief that the centre of the sales process is
about the customer’s right to be treated respectfully and fairly. A successful transaction is
only achieved when both buyer and seller receive mutual benefits. You must ensure the
deals you make are good and proper for all parties, and that the customer is happy that any
perceived drawbacks are offset by the benefits they gain.
 The ethical professional also considers the impact and consequences of their wider business
relationships. These include, but are not limited to customers, colleagues, suppliers,
competitors, local and national government and the general public. In all aspects of your
work therefore you must act responsibly – such as in your driving habits, and in your
personal tax affairs, etc. A sales professional that operates to the highest standards expected
of true professional people demonstrates the sort of leadership qualities that others admire,
and that in itself can help you win more long term business – and referrals too!
  Operating to high ethical standards may not be the easiest option. You need to commit to
yourself to support the basic concepts of fair choice for customers, healthy competition in
your markets, and entrepreneurial and innovative endeavours whilst conforming to all
relevant laws and legislation.
 In line with the above, sales ethics dictate that you will not knowingly take part in any
activities that could be detrimental to customers, are misleading, or cut across established
standards or policies in the communities you are involved with.
 You should also be conscious of the need to maximise productivity consistent with your
markets and costs of production and distribution. If and when you have some influence over
these areas in your role then you must apply your professional ethical standards to support
this requirement.
 If and when you are involved in pricing you also have an ethical responsibility to make sure
that the prices you quote to your customers always reflect the true value to the customer of
using the product or service. This includes the pricing of goods and services that are
transferred between organisations both nationally and internationally.
 You should also acknowledge that providing the best economic and social product value
consistent with cost also includes: (a) recognising the customer’s right to expect safe
products with clear instructions for their proper use and maintenance; (b) providing easily
accessible channels for customer complaints; (c) investigating any customer dissatisfaction
objectively, and taking prompt and appropriate remedial action; (d) recognising and
supporting proven policy objectives such as conserving energy and protecting the
environment.

2.2 Describe the benefits of selling ethically

Implementing socially responsible policies, i.e. ethics in business, is not just good for the
environment and the wider community, it can benefit your sales too. Mis-selling by many previously
well thought of organisations has tarnished theirs and other organisations images. Many buyers are
seeking assurances from sellers and are therefore closely monitoring the stated and actual standards
of potential suppliers.

The impact of environmental issues is added to the social issues that are already present and
therefore requires the professional salesperson to be up front about their credentials. And those
credentials must be verified by your actions throughout the selling and buying processes. Then you
will begin to reap the rewards.

By considering social and environmental objectives as well as your economic aims when selling, you
can:

 Build sales: as customers increasingly choose to base their purchasing decisions on more
than strict financial factors
 Attract investment in your organisation: as ethically motivated investors grow in number
 Maintain customer loyalty and motivation: by treating people fairly and with equality
 Enhance trust in your business: by fostering good relations and being transparent in your
activities
 Boost revenue: by opening up your organisation to new ideas
  Save money: for example by implementing better delivery procedures.

All of the points made before will make your selling more competitive and more successful, and
these are some of the benefits that you will reap through consistently applying ethical practices in
your sales role. You can sleep well at night knowing you have operated in your customer’s best
interests – and that is in yours and your organisation’s bets interests too.

There is a great deal of satisfaction to be derived this way, and you also stand to gain from improved
confidence in your methods as well as your offerings. Your consistency and reliability will be noted
by those you deal with and you will find you receive more referrals and recommendations as a
result. Your ‘personal brand’ (the way you are perceived by others) will reflect your ethics and this
will often precede you as you approach new sales situations. Potential buyers will be more willing to
listen to you and follow your guidance when they are making those all important buying decisions.

This can support you immensely as you will then begin to access quality buyers that you may
otherwise find very difficult to reach. You will effectively be building an ethical business around
yourself whilst still in the context of your organisation. Such a reputation is very difficult for others
to compete with and when you achieve this ideal your effectiveness will multiply enormously.

You will feel less stress in your role too, which in itself will help you to relate more easily to the
different types of buyer you meet – yet again improving your results.

2.3 Describe the importance of industry codes of conduct

Many organisations develop their own codes of practice; some adopt the code of practice for their
sector or the codes of other professional organisations.

Codes of practice explain to people the ways they are expected to behave. The ISMM has a code of
practice, which you will find as Appendix A of this study guide.

Here are two examples of codes of practice:

The Direct Selling Association has its own code of practice, which includes the following key features:

 Demands truthfulness and openness in all recruitment advertisements

 Prohibits unreasonable investments
 Demands proper contracts, contract cancellation rights and product buy back rights that
exceed those demanded by law
 Demands the provision of adequate basic training as part of any initial investment
 Demands the prompt payment of commissions and bonuses and provision of regular and
comprehensive statements of account (www.dsa.org.uk/about carries two inter-related
codes of practice: one for the Consumer and another for the Business owner).

The DSA website referred to also carries detailed information on the relevant legislation.

The National Lottery (www.national-lottery.co.uk) has ‘Playing the lottery in a socially responsible
way’ which states:

 You're buying fun, not investing your money

  Before playing, set strict limits on how much time and money you're going to spend
 Quit while you're ahead
 Only gamble with money you can afford to lose
 Don't spend more money on gambling with the hope to win back money that you have lost
 Keep up other interests and hobbies — don't let gambling take over your life
 Don't gamble in order to escape from stress or boredom
 Gambling in moderation is okay
 The key is…if you choose to gamble, gamble responsibly!

They also point out that if a customer needs to talk to someone about problem gambling then they
can contact GamCare. Their contact details are provided, with website links from the National
Lottery Site. This is a good example of helping the customer to make a properly informed choice.

Industry Codes of Conduct should carry realistic sanctions against those who fail to follow the code,
and this aspect increases their value to both the buying and selling individuals and organisations.

Exercise

Discuss the industry codes of conduct/practice/ethics that you have just read. What made most
impact on you and why?

2.4 Describe the consequences for self, organisation and customer if a salesperson behaves
unethically

Here’s a case study on a well-known situation that was caused by unethical behaviours in business:

High-Profile Unethical Behaviour in Business

While ethical behaviour may seem as if it is the normal course of business, it’s unfortunate that
some business people and some businesses do not operate ethically. Enron, WorldCom, Tyco,
HealthSouth, and Lehman Brothers among other companies, have been highlighted in the news
during the past several years due to unethical behaviour that resulted in corporate scandals and, in
some cases, the conviction of senior executives and collapse of some companies. While business has
never been immune from unethical behaviour, it was the fall of Enron in 2001 that brought unethical
business behaviour on the part of senior executives to the forefront. Enron began as a traditional
energy company in 1985. But when energy markets were deregulated (prices were determined
based on the competition rather than being set by the government) in 1996, Enron grew rapidly. The
company began to expand to areas such as Internet services and borrowed money to fund the new
businesses.

The debt made the company look less profitable, so the senior management created partnerships in
order to keep the debt off the books. In other words, they created “paper companies” that held the
debt, and they showed a completely different set of financial statements to shareholders (owners of
the company) and the government (U.S. Securities Exchange Commission [SEC]). This accounting
made Enron look extremely profitable—it appeared to have tripled its profit in two years. As a result,
more people bought stock in the company.
This lack of disclosure is against the law, as publicly traded companies are required to disclose
accurate financial statements to shareholders and the SEC. There began to be speculation about the
accuracy of Enron’s accounting and on October 16, 2001, the company announced a loss of $638
million. On October 22 of that year, the SEC announced that Enron was under investigation. The
stock price continued to fall, and the company was unable to repay its commitments to its
shareholders.

As a result of this unethical and illegal behaviour on the part of senior management, the company
filed for chapter 11 bankruptcy protection. The unethical (and illegal) behaviour of the senior
management team caused a ripple effect that resulted in many innocent people losing their money
and their jobs. As a result of the Enron scandal, a new law named the Sarbanes-Oxley Act (for
Senator Paul Sarbanes from Maryland and Representative Michael Oxley from Ohio) was enacted in
2002 that requires tighter financial reporting controls for publicly traded companies.

The epitome of unethical (and illegal) behaviour was Bernard Madoff, who was convicted of running
a $65 billion fraud scheme on his investors. For years, he reported extremely high returns on his
clients’ investments, encouraging them to reinvest with even more money. All the time he was
stealing from his clients and spending the money. He cheated many clients, including high-profile
celebrities like actor Kevin Bacon and his wife Kyra Sedgewick and a charity of Steven Spielberg. He
was arrested, tried, and sentenced to 150 years in jail and his key employees were also sentenced to
similar terms.

As these reports suggest, lack of ethics has serious consequences at any level. Sometimes they are
so huge that many people lose out. They lose money, jobs, families and, yes, sometimes lives are
lost.

Self

If you behave unethically it has an impact on all areas of your life.

In work your reputation might suffer; which would affect your career. You might find it impossible to
get references from your manager. In a worst case scenario you might be sacked from your job,
which would mean in you would not have a wage each month, and of course this would impact on
your standard of living and your whole future.

Your health might decline due to the stress and tension that unethical behaviour can bring about.

People who are found to have behaved unethically often lose respect from people who know them.

Organisation

If an organisation behaves unethically then it runs the risk of losing its reputation, being fined, losing
business and going into liquidation.

The value of reputation goes beyond purely economic variables. It lies, according to Jordi Canals, a
university dean, in businesses understanding that it is “necessary and essential that they cease being
merely commercial institutions” and remember that they are also social institutions.
Reputation is the sum of many intangible parts, among them a good public image, a reputation for
honesty, quality products and services, good management and social responsibility. Although
corporate social responsibility is a component of reputation, it is only a part of it: CSR is in the
company’s hands, while reputation is a matter of public opinion. Public opinion can prove difficult to
shift since it is based as much on subjective factors as on concrete experiences. Mobile phone
companies, for example, are regularly ranked among the worst businesses in opinion polls.

Regardless of whether they deserve their bad reputation, the fact remains that telephone
companies – along with certain airlines – are among the businesses that the public simply loves to
hate. On the other hand, it is fashionable to sneer at Ikea but, according to the New York-based
Reputation Institute’s rankings, it is the second most reputable company in the world, after the
Italian chocolate maker Ferrero.

A good reputation is hard to build, and can easily be destroyed

Losing a bad reputation is difficult, losing a good one all too easy. As Warren Buffet, the third richest
man in the world, remarked: “It takes 20 years to build a reputation and five minutes to ruin it.”
Some events are outside your control, but the way in which you respond to them is not, and a well-
managed response can save a threatened reputation. Take the example of Perrier. In 1990, traces of
benzene were found in bottles of Perrier water at a North Carolina plant. It is not clear how the
benzene got there, nor how much of a health risk it posed. What is clear is that the company’s
response was confused. It issued a variety of conflicting explanations and, while dismissing it as an
isolated incident, at the same time recalled 160 million bottles. In the process, Perrier lost the
public’s trust and has never recovered its market position.

From laughing stock to top model

On the other hand, the Czech carmaker Skoda has shown how to turn a reputation around. Dumping
cheap, unreliable cars on the European – and especially the U.K. – market during the 1980s made it a
byword for poor quality and the butt of jokes (Why does a Skoda have a heated rear window? To
keep your hands warm when you push it.). Then VW took it over in 1991 and within a few years the
company was synonymous with reliability. In a Top Gear magazine poll in 2005, in which readers
were asked to rank 159 cars, Skoda models were the only three European cars in the top 10 – the
rest were Japanese.

Customer

In much the same way as if customers operate outside the law, if customers behave unethically
there are implications for you as a supplier.

Let’s say, for example, that your customer offers you a competitor’s quote so that you can make a
more cost-effective offer. This is seen as highly unethical and you would be deemed guilty by
association with the customer.

Such situations are best avoided by the professional salesperson and many organisations have this
written into their Corporate Social Responsibility (CSR) policies.
Here are some descriptions of unethical behaviour:

Bribery

This is giving payments or gifts to influence the actions of an official person or business so that you
get want you want unfairly. When it comes to selling, bribery is unethical because it doesn’t allow
fairness in commercial negotiations.

In some countries bribes seem to be necessary to compete for business so Organisations need to
decide want to market in these countries.

Taking an ethical stance may cause difficulties in the short term but over a longer period the positive
publicity that can follow may be of greater benefit.

Deception

This is the temptation to mislead the customer in order to secure an order. The deception may take
the form of exaggeration, lying or withholding important information which might make a customer
change their mind about buying the product.

Good training programmes should help Sales Managers to make sure that their sales teams behave
honestly.

Occasionally there are reports of companies deceiving customers. In the UK it was suspected that
some financial services salespeople mis-sold pensions products by exaggerating how much money
people would receive when they retired. The scandal resulted in millions of pounds of compensation
being paid by the companies to their clients.

The Hard Sell

This is the use of high-pressure (hard sell) sales tactics to secure a sale. Some car dealerships have
been accused of using these tactics to pressure customers into buying a car using expensive credit
facilities.

One major car manufacture decided they wanted to work ethically and so sold cars using customer
advisers who did not receive commission for what they sold. Their job is to help customers choose
the car which meets their needs rather than pressuring them to buy something they don’t want.

Reciprocal Buying

Reciprocal buying is when a customer agrees to buy from a supplier only if that supplier agrees to
buy something from them.

This may be seen as unethical because it is unfair to other competing suppliers who may not be in a
position to buy from the customer or may not want to buy from them.
Exercise

Use the table attached to make lists of the consequences to you, your customer and your
organisation if you behave unethically

Consequences to me Consequences to my Consequences to my

customer organisation (or one with
which I am familiar)

There are many laws that govern the industry of selling and at times we can all take them for
granted. We need to sell bearing in mind the rights that the end customer has and we also need to
sell in an ethical way too.

So that’s the end of this session. Attached is an action planning document for you to complete so
that you can start to embed the learning that you have just covered.